Ira Interest Rates

Frequently Asked Questions

1. QUESTION:
   Does the interest rates on Roth IRAs differ based on where you establish them?
   I would like to open a Roth IRA. Do the interest rates or rates of return differ between Vanguard, Fidelity, my personal bank, etc. just as the interest on a savings account a different banks would differ? If so, do these rates fluctuate daily? Does anyone know whose rates are consistently higher? Can I have more than one Roth? Can I have a Roth AND a Traditional IRA?

   • ANSWER:
     Your rate of return will depend more on what funds you decide to invest in rather than what company you decide to invest with. Most mutual funds have different investment objectives to match individual investor’s unique goals. How you allocate your funds between asset classes (stocks, bonds, cash, etc.) will determine your potential return. Also, your investment time horizon (how long before you use the money) will also factor into your potential rate of return.

     You can have as many Roth IRAs as you want but you cannot contribute more than the maximum ,000 a year collectively.

     You can also have a traditional IRA and a Roth but you still are limited to the ,000 maximum combined. For example, you could contribute ,000 to each IRA but not ,000 to each.

2. QUESTION:
   What is a GOOD investment right now w/ the way interest rates are? I use to do CD’s, I already have a roth IRA?
   I have ,000 to put somewhere.

   • ANSWER:
     Although stocks may seem negative, there are many at bargain prices. I would stay away from Banks and Transportation stocks, also unless you have heavily research Biotech stocks they may be a bit tricky. It really depends on if your looking long term, however, I feel that CDs are pretty worthless as their rates barely cover inflation.

     I am starting a website called InvestmentFractions.com that will be able to earn every investor a flat 10% rate, however, it will not be fully running until mid October.

3. QUESTION:
   Where do I go to get the best interest rate for a Roth IRA?
   I am looking for a place to check out, so I can get the highest interest rate possible on a Roth IRA account. Please advise me on where I can start. Thanks

   • ANSWER:
     Consider the Vanguard Prime Money Market Fund with a current compound yield of ~4.7% APR. https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0030&FundIntExt=INT

     Sometimes other institutions will have a higher teaser rate, but Vanguard tends to have the highest yields I’ve found over the long run. (Vanguard money markets are not FDIC insured, however.)

     Article on teaser rates:

     http://www.marketwatch.com/news/story/banks-advertised-rates-dont-always/story.aspx?guid=%7B0A13B6E2-FFB2-4E2B-BD42-E2D1E01C52E5%7D

     ING and HSBC often have rates close to Vanguard, and most of their products are FDIC insured. Bankrate.com provides links to CD’s with high interest rates. You can check these at the following links:

     http://home.ingdirect.com/

     http://www.us.hsbc.com/1/2/3/personal/savings?code=husa

     http://www.bankrate.com/

     (If you are investing for a long period of time and are willing to accept some volatility, you should consider putting some money into no-load low-expense mutual funds. Vanguard.com has many good funds. These are not guaranteed, but over the long run produce much higher returns.)

4. QUESTION:
   Question about interest rates on IRAs?
   When you go to bank-they usually quote a low interest for an IRA. They always say that because of taxes that you are paying that you are basically getting the equivalent to the higher interest rate on a regular account.

   For example, they say that 3 percent on an IRA is the equivalent to 5 percent on a regular account.

   How do they figure out what percentage on an IRA is equivalent to the percentage on a regular account?

   • ANSWER:
     You should calculate all of your interest rates(Yields) to the same standard. In this case you should use a tax-free yield.

     The rate that they are giving you for your IRA is alreadly Tax-free at 3% so you need to calculate what your rate will be for the Taxable yield.

     Take the 5% and subtract out your total tax rate. I assume it is around 28%-35% so for my example assume 28% taxes, (1 – tax rate is what you will have after taxes or 1-.28 = .72).

     At 28% taxes (.05 X .72 = .036) or 3.6% Tax-Free Yield equavalent on the 5% taxable yield.

     So now you can do your comparison.

     If they are offering you 5% yield but they still can take taxes out then you will only be keeping 3.6% of your yield after taxes at 28% rate.

     But that 5% even with taxes being taken out is a better rate then the 3% that they would offer you tax-free in your IRA.

     In other words if the going taxable rate is 5% don’t take less than 3.6% for your IRA.

     Or if it helps put real money into the equation.

     ,000 @ 5% for 1 year will give you back

     then you pay taxes on that @ 28% tax rate.
     X .72 = total return after tax.

     Compare what they would pay you for the 3% with no taxes taken out.

     ,000 @ 3% for 1 year will give you

     I hope this helps, if not, or is confusing please let me know.

5. QUESTION:
   what would be an average Interest rate on a Roth IRA?
   ive heard of compound interest and thought that opening a roth ira would be a good way to make some money in the long run, but can anyone tell me what an average rate on an IRA goes for now a days? ive heard of people talking about 12% or so but if its not that then how can someone accumulate interest that is more than 12%. Thank you

   • ANSWER:
     Right now it’s about 4.5 % . . . maybe you can find up to 5%.
     Using a brokerage account, you could place the funds in other investments – stocks, bonds, etc. Currently the market is “depressed”, but that means it’s the best time to buy.
     Higher risk, but potential for 20+% return per year too.

6. QUESTION:
   What Roth IRA company has the highest Compound interest rate?
   I’m looking for somewhere to put my money and build it up as well. Help?

   • ANSWER:
     For information on what a ROTH IRA is and whether or not you should get one visit my Blog.

     http://familymanfinance.blogspot.com/

7. QUESTION:
   ira with 0000.00 total interest is 000.00 per year 2 interest rates 5.2 and 7.7 how do you split the mo?

   • ANSWER:
     The average of two interest rates of 5.2 and 7.7 equals 6.45 whereas the effective rate is 34000/500000 = 6.8. This means that the money has been invested for more months at 7.7 than 5.2.

     The difference between the effective and average rates is 6.80-6.45 = 0.35
     and the difference between the two rates is 7.7 – 5.2 = 2.50. Dividing 2.50 with 0.35 you get 7.14 months. This suggests that investment at 7.7 was for 7.14 months while at 5.2 it was for 4.86 months.

8. QUESTION:
   When starting an IRA, how is the interest rate on your IRA determined?

   • ANSWER:
     It depends on what you choose to invest your IRA in. It’s up to you to to determine how your contributions (and employer match, if any) will be allocated between the available investments.

     If you are investing through a plan through work, the choices will likely be more limited than if you set up a separate IRA through a bank or brokerage.

9. QUESTION:
   Where can I find the best Roth IRA rates?
   My current Roth IRA only accumulates 2.5% interest. Where can I get better? Highest rate return gets 10pts!!!!
   I’m not sure if what I’m asking will make sense, but I’m looking for the kind of risk I’d normally expect from a good mutual fund, something I can manage myself — ultimately, I want to protect my 10K from being counted against me when I apply for financial aid so I may go back to school…. I understand a Roth might help with that… THANKS!

   • ANSWER:
     You didn’t specify the type of investment you have currently in your IRA portfolio. You need to be more specific on whether you’re willing to take on more risk. From here you’ll be able to find the type of investment you’re willing to invest (mutual fund, bonds, stocks, etc.) and then extrapolate the historical return you should be receiving.

     I have Vanguard Roth IRA diversified into 80% VTSMX (Vanguard Total Stock Market Index) and 20% VGTSX (Vanguard Total International Stock Index) and the theoretical long term return is about 10.5%

     My return from VGTSX (Vanguard Total International Stock Market Index) recently has returned close to 20%, but that is out of the ordinary and not expected sustainable over the long term. You should not chase recent short term return, but instead focus on the long term.

10. QUESTION:
    Which savings account has a better interest rate: TSP, Roth IRA or 401K?
    Is it good to have all three?

    • ANSWER:
      You misunderstand. They are not “savings accounts.” Those are simply different types of retirement accounts – not specific investments. They do not have fixed “interest rates.” It all depends on what specific investments are held within the accounts. That is up to the account holder.

11. QUESTION:
    Does rollover IRA earn Interest just like 401k?
    Lost my job and had to rollover my 401k. Since most of investment institutions have minimum of 00 I had to go to my local bank and opened rollover IRA account (Chase that is). Apparently their interest rate was only 0.01%. Is it normal? thanks

    • ANSWER:
      An IRA is a type of investment account, in and of itself a 401k or IRA earn whatever rate the particular investment you made earns. That may be stocks, bonds, gold, or in your case a savings account that earns virtually nothing. Is it normal for an investment account in a savings account to earn 0.01%? Yes.

12. QUESTION:
    where can i get a good interest rate for ira?credit union or traditional bank?

    • ANSWER:
      If you don’t intend to use the funds for more than 5 years it should be invested in something, not in bank deposits.

      You put money in the IRA to save on taxes but you also want to beat inflation. Inflation is usually around 2-4% per year. Most bank deposits won’t consistently pay that much. There are multiple conservative investments that have growth potential of 6-8% a year. If you’re not comfortable with mutual funds or stocks there are other things you can invest in. Some of them backed by the FDIC or an insurance company.

      The only way I would recommend a bank or credit union deposit account for your IRA is if your IRA is very small (under 20K) AND you’re taking immediate distributions or if for whatever reason you anticipate needed the funds in the next 2 years. This could mean you’re young and expect to use 10K for your first time home purchase, or your job is unstable and you anticipate needed the funds for an emergency.

      If you don’t need the funds soon invest them.

13. QUESTION:
    Why would I want to invest in an IRA?
    What are the advantages to investing in an IRA if the interest rates are similar to a regular savings account?

    • ANSWER:
      Tax Advantages Associated with the IRA

      ~ ~ ~

14. QUESTION:
    Should I pay off school loans with a 7.25 interest rate with all the money I have in my Roth IRA’s?
    I’m 26, going back to college but almost done. I am going to end up with about ,000 in debt when I graduate with Bachelors. Should I pay off some of this school loan debt with all the money I have in my Roth IRA?

    • ANSWER:
      I disagree with themurp. If you withdraw money from IRAs… which is a bad idea period… you will have a 10% penalty, plus tax. You avoid the penalty ONLY when you use the fund to pay qualifying expenses. Current student loans do not qualify.

15. QUESTION:
    What will happen to me individually once the interest rates rise?
    my situation:
    Rent
    Have a job with a fixed income
    Have 50K most of it in Vanguard Mutual Funds
    Owe 0 on my credit card

    Maxing out my Roth Ira every year VTIVX with vanguad

    Thoughts?

    • ANSWER:
      It sounds like you really have your act together – good job!

      I’m with Aleks, though – everyone should have an emergency savings fund with at least 3-6 months’ worth of living expenses (everything – rent, food, utilities, gas, etc. – for most people a good amount is around K – K). This should be kept in a “boring” account like a money market (you could put half of it in CD’s to get a slightly better interest rate). First pay off your CC debt, then start building your emergency fund.

      I have found that it comes in handy even for small emergencies and unexpected expenses like trips for family emergencies/funerals, new tires, “emergency” ski trips, etc. I just use that money, then spend the next few months building my account back up. It saves me from having to use my credit card for these things.

      Keep building your Roth (VTIVX is a good fund), but maybe cut your monthly contribution in half, and use the other half to build up that emergency account.

      Don’t worry about interest rates – when they rise it may cause a temporary dip in the stock market, but that only means you’ll be buying more shares with your regular investments. Also, you’ll start to earn more in your emergency fund.

      I hope that helps – good luck!

16. QUESTION:
    Where can I open a Roth IRA so that I can both trade stocks and make a fair interest on idle cash?
    I would like to be able to buy and sell stocks with a reasonable commission ( or less). I would also like my cash to make a decent interest rate when it is not invested in the market. Finally, I would like to be able to buy stocks quickly with my idle money. If there is a long transfer delay it won’t work. Thanks for the help in advance.

    • ANSWER:

17. QUESTION:
    Can I make the bank increase my IRA CD’s rate if rates go up once I’m over 62 years old?
    I’ve heard that if for example I open a 10YR IRA CD at 2% and the interest rates for that IRA CD at the bank climb up to say 3% I can go in and have them change the rate on my CD up to the new 3% rate even though my IRA CD has not matured. Is that true ? Is it an IRS rule ?

    I’ve also heard that you can only do this once a year. Is that also true ? If so, does the yearly rule apply on an account by account basis or is it for all my IRA CD accounts ?

    • ANSWER:
      my only question is, why are you saving money in a CD? If inflation is 3.5% a year and you are only getting 2% on your money, you are losing it purchasing power every year. Find a low risk, well diversified mutual fund!

18. QUESTION:
    What kind of interest rate can I get on an IRA account?

    • ANSWER:
      no one can say — ira is an account how it is invested determines how much interest it will draw!!!

19. QUESTION:
    RMD on Beneficiary IRA after Rollover/Change in Trustee?
    I understand that when I rollover my beneficiary IRA that the RMD for 2007 must be taken first. My question is, must the RMD’s continue with the new institution/IRA account after the rollover. I am doing the rollover because the IRA-CD interest rates at the current institution are less than what I can get elsewhere. Please advise. Thanks.

    • ANSWER:
      No.
      You can transfer the IRA to a new financial institution.

20. QUESTION:
    What Bank in the United States has the best interest rates?
    IRA’s & Money markets

    • ANSWER:
      Easy question … check out BankRate.Com, an impartial rating service for credit cards, CD rates, etc.

21. QUESTION:
    If I have an IRA with a 3.91 interest rate, is this interest accrued monthly or yearly?

    • ANSWER:
      Here’s a more relevant question.

      If you go out to yahoo’s mutual fund screener, and do a search on 4 – 5 star rated, no load mutual funds that have returned 20+% for the last 5 years, you will get over 400 of them. With all those choices returning 5 times what you’re currently getting, why are you settling for <4% a year?

22. QUESTION:
    what is the average interest rate for a traditional ira?

    • ANSWER:
      Uhh, none… An IRA is an account, not an investment. You can make investments with the funds that you have in the IRA and the proceeds from those investments will not be taxed until they are distributed from the IRA. As an account, there is sometimes a modest yield in the money market funds which is what your money is invested in when you don’t choose an investment. Inside an IRA, you can invest in stocks, in mutual funds, whatever your broker allows you to invest in in the IRA. An IRA is not something you just put money in and forget about it, it’s basically a tax deferred brokerage account.

23. QUESTION:
    I just opened a ROTH IRA but the interest rate was .01%….?
    I was really confused by the rate since I had heard Suze Orman say that you can have Million in your ROTH IRA if you put 0/month in for 35 years. I am 25 and starting in February, will be able to put 0/month in my ROTH IRA. I’m confused about what to do with that 0/month because the banker that just set it up for me said that I could leave it alone at .01% or put it in mutual funds and annuities and such but I don’t really know what that means, and the last thing I want is to be 60 and have all my “planning” be a complete waste and have no money in the account. So if someone could actually explain to me what to do with 0/month, please let me know.

    Sarcasm and such is not going to be helpful. I know it makes you feel better about yourself, but please….take it somewhere else.

    Spammers will be flagged.

    • ANSWER:
      Yes, it sounds to me like you are in a money market fund. That is way too conservative for someone your age.

      My short answer is that you need to invest your Roth IRA into equity mutual funds. My favorite fund companies are Vanguard, T. Rowe Price, and Fidelity. All have an excellent selection of funds, low fees, great websites, and outstanding customer service.

      If you’re not sure what type of equity fund to invest in, start simple with an S&P 500 fund – this will spread your investment across the 500 largest U.S. companies (think Coke, GE, Disney, Microsoft, etc.). Note that equity funds fluctuate up AND DOWN over the short term, but historically they have been the best long term investment, averaging around 9-10% per year. If you average 9% per year, your monthly 0 will grow to about 0K after 35 years. But remember, you’re going to be increasing your monthly investment amount as you start making more money.

      After you set up your account, you should educate yourself about investing – it’s really not that complicated, and this information will serve you VERY well throughout your life. Talk with a friend or family member who knows about investing or – better yet – pick up a “For Dummies” or other beginning investment guide at any bookstore or library.

      BTW – it’s great that you are thinking about investing for retirement at your age. The longer you wait, the more difficult it becomes. You are doing yourself a HUGE favor by starting now.

      I hope that helps. Good luck!

24. QUESTION:
    Roth IRA compound interest?
    we talk of roth ira as compounding benefit. but, if we invest in stocks we get say minimum 8%, but there is no compounding. if we invest in CD’s or bonds we have compounding but cheap 3-5% interest rate. so, why does everybody say take the benefit of compounding if we get 3-5%; instead of stocks. Am i wrong in my calculations. please explain.
    Thanks everybody for answering. It cleared some of my questions.

    • ANSWER:
      An IRA is just a type of account. Within it, you can invest in stocks, funds, bonds, CDs, etc. The “compounding” effect is because your earnings are reinvested.

25. QUESTION:
    Can I rollover my roth ira to a different company but also roth ira?
    My agent wants me to roll my Roth IRA to another company (company1)that has better interest rates. Can I roll my roth ira to another company (company2) without penalties?

    • ANSWER:
      Yes, you can. Have the new company do a direct transfer. Technically, they don’t call it a rollover, just a transfer.

26. QUESTION:
    IRA ROTH? Is this a good interest rate?
    I just turned 18 years old. I am planning to start an IRA ROTH because I heard the earlier the better. I am part of the Navy Federal Credit Union. I want to start with the 7 year certificate that requires a 00 minimum deposit and offers a 4.10%. I might start with the 1 year special easy-start certificate that requires a deposit and offers a 3.25%. Are these good interest rate? If not, tell me an good rate and from what company.

    • ANSWER:
      i assume these are CDs you are talking about? i would suggest you stay away from the 7 year certificate. right now interest rates are low but the economic experts are predicting rates will start going up and you don’t want to be locked in to anything for 7 years.

27. QUESTION:
    Are there any whole life insurance / Roth IRA options similar to Colorado Banking?
    I recently spoke to an investment broker about an option offered by Colorado Banking that offers an IRA with a guaranteed interest rate where the amount you put in (0 per month) goes toward a 80,000 whole life insurance plan and also into an IRA that would return 319,000 at the end of 45 years. I’ve done the math and it does work itself out, but I’m curious if there are any companies that compete with the same type of plan.

    • ANSWER:
      Woah. Sound like you are being rip off. I don’t know how much you are spending on the whole life insurance, but I bet you are spending at least 0 on it. And what interest rate are you getting on your IRA?

      I have a 20 year term policy with 0k coverage at age 30 and spend only /month on it. I also put in 0/month into a Roth IRA and with an average rate of return of 10% over the 20 year period, I would have about 6,278,

      But if I was in your situation and invested difference of 0/month for the next 20 years with a rate of return of 10%, I would have ,883. In 45 years, I would have .2 million. Or if at the end of the term, I increase my contribution from 0 to 0/month and continue to invest for the next 25 years, I would have about .3 million. Yes I know 10% is not guaranteed, but with the mutual funds I seen and currently have, they have average out 10%-14% during the last 25 years (even with the recession we are in right now!)

      Are you sure you still want to do business with that bank?

      By the way, I have life insurance and my investments at Primerica Financial Services. You should check them out. If you don’t like the company, at least get a financial needs analysis which is a helpful financial guide to help you reach your financial goals. They do it for free.

28. QUESTION:
    what is the average interest rate you will get on a roth ira?

    • ANSWER:
      There is no average. Totally depends on what you choose to invest it in. An IRA is not a specific investment – it’s just a type of account that holds investments within it.

29. QUESTION:
    What exactly is a Roth IRA and should I start putting money in it? Im 22?
    Im 22 and just started my first “real job” right out of college. About to finish paying off my student loan and was looking at also investing in mutual funds and a Roth IRA. What all is involved with a Roth IRA? Does it have its on interest rate or whats the deal?

    • ANSWER:
      A Roth IRA is a tax advantaged account that allows you to put money into it after taxes, and allows the money to grow tax-free from that point forward. Therefore, as your investments grow, you will not have to pay taxes on that money ever again. The only potential downside is that once the money is invested in a Roth, you cannot take it out until you are 59.5 years old (government regulation). But, there is a huge advantage to having your money grow tax free.

      And once the money is in the Roth IRA account, you can invest in anything you want – stocks, mutual funds, bonds, etc. It is the perfect savings tool for someone in your situation.

30. QUESTION:
    What is a realistic return and interest rate on a Roth IRA in NYS?
    I don’t know that much about IRA’s but was wondering if it was better getting a 5K Roth IRA or putting 5K into a CD with a return of 5%? I live in New York State.
    So far, the first 2 responders gave me EXCELLENT ANSWERS. But, if the bank is going to try to sell me their junk, then where do I go where I’m not spending all my ‘profit’ on fees from say an investment corp?
    BTW: I’m 30 going on 31, leaving grad school in the science field, don’t have a job lined up and chances are will be working on short term low pay post-docs for the next 10 years.

    • ANSWER:
      Well, you need to figure out what your financial objectives are for the money. That will determine whether you should be investing short term or long term.

      I think given your situation, I might try to do both. Put some money in a Roth IRA (say k) and put some in a CD. Vanguard, Fidelity and Schwab are some good places to open a Roth IRA account. A good mutual fund (or an S&P 500 index fund) should be able to make about 10% a year on average over the long term (10 years). It’ll also lose money in about 3 of those 10 years.

      And you never know what the future will bring. If you’re doing low paying post-doc research in 10 years, I’d be surprised. I know someone who got his Ph.D in Chemistry and retired at 35 (by investing well). Of course, if you were to participate in some great scientific breakthru, that would be its own reward.

31. QUESTION:
    Will high interest savings rates begin to rise again?
    I opened a high interest savings account last year at age 22 to begin saving for emergency funds and a down payment on a house which I plan on putting to use by the time I turn 30-31. My rate was initially 3.00% now it’s dropped down to 1.5%. I’m wondering will rates begin to rise again? I tried looking at other banks but it seems to be the same for others as well. The same for IRA accounts, how will rates effect my earning potentials in both cases?

    • ANSWER:

32. QUESTION:
    Why are bank CD rates so low at brokerage houses?
    Interest rates on CDs offered through brokerages are so much lower than the same CDs offered through banks. Why is that? If they were in a regular account I would switch to a bank but it is in an IRA account and not so easy to switch funds back and forth. At this stage want to diversify in IRA account and not keep everything in stocks or bonds.

    • ANSWER:
      Actually your broker should be able to find you the best rates But the rates are all low why not but it in a stock or bond with 6% yield

33. QUESTION:
    Interest Rates / Annuities /Etc. What is the formula for this problem?
    Bob makes his first deposit into an IRA earning % compounded annually on the day he turns 22 and his last deposit on the day he turns 44. (23 equal deposits in all.) With no additional deposits, the money in the IRA continues to earn % interest compounded annually until Bob retires on his 65th birthday. How much is the IRA worth when Bob retires?

    Just looking for the formula(s) that i’ll need for this problem
    i can solve them no need to waste anymore of your time
    best answer goes to the first to give me the correct formulas
    i appreciate it alot
    thank u thank u

    Bob makes his first 0 deposit into an IRA earning 7.5% compounded annually on the day he turns 22 and his last 0 deposit on the day he turns 44. (23 equal deposits in all.) With no additional deposits, the money in the IRA continues to earn 7.5% interest compounded annually until Bob retires on his 65th birthday. How much is the IRA worth when Bob retires?
    could u actually try solving it because i got a “wrong answer”
    HOORAY
    got it
    thank u very much, best answer to you sir!

    • ANSWER:
      There is NOT enough information to solve this problem. You should gives us how much money that he deposit in each year and the interest rate that he earns in order to calculate the future value of the IRA using the formula FVn = (PMT*{[(1+i)^(n1)]-1/i})*[(1+i)^(n2)] where FVn is the future value of the annuity at his 65th birthday, PMT is the annual deposit that he deposited until he turns 44, n= total number of years which he invest=44, n1=the number of years which he makes deposits= 23, n2=the number of years that he still earns interest=65-44=21, i= the annual interest rate.

      EDITED.
      FV = (950*{([(1+7.5%)^(23)]-1)/7.5%})
      *[(1+7.5%)^(21)]
      FV =247394

      The IRA worths 7394 when Bob retires.

34. QUESTION:
    How does this work. The compound interest rate is 3.41 and the dividend rate is 3.3?
    This is for one of my roth IRA’s with my local bank. The compound interest rate is calculated daily and I am not sure about the dividend rate. So If I put 10,000 in, at the end of the year would I find out how much interest I will have at the end of the year by calculating 3.41 compounded (daily) then a one time dividend calculation rate of 3.3? Please help! Thanks

    • ANSWER:
      The 3.3 percent is the interest/dividend for the year. However, instead of just giving you the simple interest of 0 on December 31, the bank figures IRA figures the interest based on a a daily basis (which is about .00904% daily). Because in effect you will get interest on th e interest (each day they add in the interest earned the previous day), the actual rate (the APR) comes out a little higher then the simple rate. In this case, the interest on interest (compounding) earn you and extra .11 of a percent annually, so instead of having 10,330 at the end of the year (compounded annually), you will have ,441 compounded daily. You don’t get credit for the 3.3% again.

35. QUESTION:
    what interest rate can i get on a ira?

    • ANSWER:
      An IRA is NOT an investment, therefore you do not get an interest rate or any type of return on it.

      Instead, an IRA is just a special type of account setup for tax benefits. Within that account, you can purchase investments that then earn interest rates.

      The two most common places to setup an IRA are:

      1. A Bank (Bank of America for example)
      2. A Broker (Scottrade for example)

      If you want a bank account, you can earn between 5.00-5.50% a year right now. If you want a broker account, you can earn (or loose) any amount because there is risk associated with buying stocks and/or bonds.

36. QUESTION:
    Roth IRA Certificate of Deposit in international bank?
    Can I put money earned in US into a Roth IRA Certificate of deposit in an international bank ?
    Reasons –
    1) i am happy with a lower but steady bank interest rate on my retirement funds.
    2) i don’t like bond funds. I would like to buy a 10-15 yr maturity CD and have peace that i wil get the same interest rate.

    Why international ?
    - because of higher interest rates.

    Is it possible ?
    Is it possible in an indian bank (i am interested since i am a citizen of india working in US) ?

    • ANSWER:
      If an Indian bank offers the product, then you can do that. I know that US banks offer ROTH IRA deposit accounts.

37. QUESTION:
    Traditional IRA CD vs. annuity?
    My traditional IRA CD matured this week, and the bank is pushing me to invest in a fixed annuity account via a large insurance corporation. This account is not guaranteed by FDIC but is secured 100% by Transamerica Financial Life Insurance Co. The difference is the interest rate. The traditional IRA interest is currently 3.3% for 3 years, and the insurance-based IRA CD is 3.55% for 5 years. If I want to be sure these funds are absolutely safe, which route should I take? How safe would the annuity be? Thanks!

    • ANSWER:
      Carol,

      As others have pointed out, the bank officer makes more commission on an insurance annuity than rolling over your CD (which has no commission).

      Shop around for a better CD rate. Federal Credit Unions pay very well and you should check out bankrate.com for banks close to you or you can buy a CD by mail (I prefer a local bank myself). Even brokerage firms like TD Ameritrade and Charles Schwab have IRA FDIC insured CDs.

      Note: The IRS allows 60 days to take the proceeds from the old CD and deposit the money into a new CD somewhere else so don’t feel any pressure whatsoever from your bank.

38. QUESTION:
    It is wise to pay off credit card bills with some of my IRA $ and take the hit on the tax and penalty?
    I have some cc debt I would really like to wipe out. Although there is a penalty and I’d need to pay the tax (it’s a conventional IRA, not a ROTH), is it wise to do so? Most of my credit card interest rates are around 12 to 14.99% (I’ve gotten them lowered as much as possible). Thank you…

    • ANSWER:
      no the interest and penalty will not off set the high rate of interest — the only reason you would do this is if you were not putting food on the table!!! just plugging away and get them pay off!!!

39. QUESTION:
    Investing under a Roth IRA?
    So, lets say I put in ,000 into a European Index Fund that in 1 year goes up to ,000. Does the Roth IRA interest now calculate ,000 or the ,000? Does it do the total assets in my Roth IRA? I am trying to explain it the best I can. Well, lets say you made a great return on your stock exchange like 200% yield under your Roth IRA…does that new amount of money get factored into the interest rates of your ROTH towards retirement?

    • ANSWER:
      You dont really earn “interest” as in the sense of a bank paying you interest for the use of your money. Roth IRAs invested in the stock market via things like mutual funds have a rate of return depending on the funds performance.
      Yes if you were to invest 5000 which grew to 6000, you now have 6000 in assets. But you are not “garateed” to earn more money because you have 6000 in assest. You basically own the same number of shares that you did at 5000, they are just valued higher now.
      With the ups and downs of the stockmarket you could invest 5000 on year, it grow to 6000 the next, and fall to 5500 the next. Roth IRA invested in mutual funds (good aggressive groth/income/international funds) will do great over the long term.
      But know that your not making a standard “interest” rate for your money, it is all based on the performance of the fund.

40. QUESTION:
    Whats the best online bank with the best interest Rates ??
    i am 16 and want to open an IRA Account for the future . i have to start off with 400 $ and ill put it under my dad for now since i am not 18
    I said best not a list

    • ANSWER:

      http://www.natwest.com

      http://www.hsbc.co.uk

      http://www.loydstsb.co.uk

      http://www.barclays.co.uk

41. QUESTION:
    Compound Interest rates?
    Help. I cannot figure these out. I plug these numbers into the formula and I keep getting the wrong answer. Been at it for 3 hours and I am going crazy.

    1. How much needs to be deposited now at 8% compounded annually for 3 years in order to have 00?

    2. At age 25, Miss Roxanne Davenport deposited 00 into an IRA, where it earns 9 7/8% interest compounded monthly. What will it be worth when she retires at sixty-five?

    Please show me how you figured this one out. =/ I’m losing it.

    • ANSWER:
      2) I’m assuming the interest is per annum.

      P=4000 R=9.875/12 –>79/96 n=(65-25)*12 –> 480

      =P(1+R)^n
      =4000(1+9.875/12)^480
      =4000(175/96)^480
      =calculator error…(do it manually)

      1) 2600=P(1+R)^n
      2600=P(1.08)^3
      2600=P*1.259712
      P=2600/1.259712
      P=63.963827

42. QUESTION:
    What is the difference between an IRA and a Certificate of Deposit? Pros and Cons?
    I have invested in Certificates for years and want to learn more about the difference between an IRA and a CD. Can someone explain these in more detail for me? What I am looking for is the best interest rate for my dollar. I don’t need the money anytime soon, but don’t want to be majorly penalized if I were in dire straights either.

    • ANSWER:
      You are confusing an “investment” with an account type. A CD is a savings vehicle, or investment. An IRA is an Individual Retirement Acount, a tax-favored account for working individuals to save money for retirement. Opening an IRA is a no-brainer. Everyone needs a retirement plan. But that is not an investment. Once you establish an IRA, you then have to choose the investment.

      A CD is typically used for shorter-term savings. It is generally guaranteed and pays a lower rate of return. It is not going to enable you to build wealth for retirement, however, because lower yields don’t keep you ahead of inflation, especially after-taxes.

      Stocks are commonly used to accumulate wealth for retirement. Stock mutual funds are a great way for smaller investors to participate in a diversified portfolio of stocks that are professionally managed so you don’t have to make the tough buy and sell decisions. Such funds are not going to allow you to “strike it rich” but they are going to give you the best possibility to accumulate real wealth for your retirement.

      Incidentally, you can invest in mutual funds outside an IRA as well….that’s because an IRA is not an investment but rather a type of account that comes with some restrictions (like a 10% penalty-tax if funds are withdrawan before age 59 1/2), and some benefits (like tax-deductible contributions, if you qualify).

43. QUESTION:
    What should a Roth IRA consist of now with the market in turmoil?
    I know people normally do a 60/40 % ratio. So 60 percent goes in mutual funds and 40 percent goes in CDs.

    But based on recent events why not establish an IRA and simply put all of the money in short-term CDs?

    Are there CDs out there where you can continually add money to them?
    So it would be like a savings account but you are guaranteed a certain high interest rate?
    Im 19 year old but I don’t want to dump my money into something.

    • ANSWER:
      It depends on your “asset allocation” model which would be built on by looking at your needs, risk tolorence, inflation expectations and years to retirement and a resonable quess at years in retirement.

      A 60/40 split rarlely means 40% in CD’s. for a 19 year old it should be none at all. Beside a 60/40 at your age would be a terrible idea… it may be way too little to get to your goals. So the answer is an “asset allocation” model.

      I believe the last place for retirement money before age 75, is a bank. The next worst place for any retirement money is an insurance company.

      Take some time. Learn about this stuff!!!! Start by reading; Mutual Funds For Dummies. It’s a whole lot better than getting advice from strangers who don’t know you & your needs. Besides you don’t know their qualifications or motives.

44. QUESTION:
    Is it worth it to allow my retirement money to be automatically transfer to the traditional IRA?
    They have annual yield interest rate of 0.10%, which is really little. Is that all I will be earning if I transfer it to the traditional IRA? Wouldn’t it be better if I withdraw it out and place it in a saving account that have around annual 2% interest rate?

    • ANSWER:

45. QUESTION:
    Is it possible to convert my checking accounting into a Roth IRA?
    I have come across a bank that pays a good interest rate on a checking accounting. Is it possible to incorporate this checking accounting into a Roth IRA?

    • ANSWER:
      No. You can’t write checks on an IRA.

46. QUESTION:
    Roth IRA account?
    I have an IRA Account w/ USAA is this good or is tehir something better? Im not looking into brokerage accounts plus I think I can only go from IRA to IRA.
    Current Interest Rate 4.300%
    Effective Annual Rate 3.752%
    Guaranteed Minimum Rate 3.00%

    • ANSWER:
      It’s unwise to hold such a conservative investment in a Roth IRA. Learn about mutual funds and exchange traded funds (ETFs). For a ROTH, I think ETFs are the way to go. That will probably mean switching from USAA to an online service such as Schwaab.

47. QUESTION:
    Transfer IRA CD from an out of state bank to another institution?
    I have an 18 month IRA CD that I renewed in March of this year. Can I transfer it to another institution without a penalty? I found one offering a much higher interest rate. I’d hate to have to wait until it matures! Also, is there anything else I could roll it over into before it matures without a penalty? It’s not a small amount of money and I’ve really made a stupid mistake in renewing it.

    • ANSWER:
      If this is a bank CD, you are going to have to pay whatever early withdrawal penalty you contracted for. Check your documents, as these penalties vary.

      Otherwise, you are going to have to wait for it to mature.

      Sorry.

      –>Adam

48. QUESTION:
    What all is involved in a ROTH IRA? How much money do i need down? What rates are included? Anything you know!
    When I finally start my new career as a nurse I want to get rid of my 5,000 dollar debt and also invest! I want to have a great retirement! I have been interested in a ROTH IRA and wanted to know more about it!

    • ANSWER:
      The first misconception a lot of people have is that ROTH IRA is an investment. It isn’t. It is an account registration for tax purposes. The types of investments you can possess in a ROTH IRA are nearly limitless. It can be applied to the savings account at your bank or individuals stock or bonds. They can all be held in a ROTH registered account.

      For small investors like myself, make sure you can take of you and your family’s (if you have one) needs first. Try to have a couple months wages of saving first for the what if’s (car repairs, sickness). Make sure your adequately insured. Then consider investing.

      If you are rather young and are focused on retirement, then I strongly recommend walking through some retirement tutorials at some major mutual fund companies. They have done a lot of work to help new investors understand the market, risk, returns, and investment options that will fit your risk tolerance. Consider one of these major mutual fund companies:
      Fidelity
      T. Rowe Price
      Vanguard

      You will find a link for retirement or retirement guidance on each of these companies web sites.

      Take the time to educate yourself, and you can avoid being steered in the wrong direction by someone looking at you as his next commission.

49. QUESTION:
    How do you calculate IRA accounts?
    I already get the basics but the the one problem I have is calculating interest rates. If the the credit rate is 2% for 00 and its a 3 month account. How much would I make and how did you calculate it? Oh, and how do the penalties for withdrawing work? I went to the bank but I got the impression they just wanted me to sign the doted line to scr3w me over.

    Thanks!

    • ANSWER:

50. QUESTION:
    How does someone get an IRA account?
    What is the minimum I could contribute? What interest rates are involved?

    • ANSWER:
      Some banks will let you start with just 00.

      Suggest you read up on the subject at www.Vanguard.com.

      You can open an IRA at a bank or mutual fund company as well as some other choices. You may choose how to invest the money.

      Vanguard’s STAR fund is a good choice.